Black market thriving in Zimbabwe

Money-changers are among the few people doing well out of Zimbabwe's crumbling economy.

Hotels in Harare's central business district used to be the preserve of the well-heeled businessmen and tourists who flocked to Zimbabwe, particularly from the West.

As high-powered business deals were concluded inside the hotels, the prostitutes would wait outside to ply their trade. As soon as you stepped out of the hotel lobby during the evening, scantily-dressed women would try to attract your attention from behind parked cars. Just in case you missed the furtive signals, they would pop up beside your car and tap discreetly on the window.

But no more - the ladies of the night have grudgingly yielded to a new and rapidly growing breed of entrepreneurs, the black-market money-changers.

Unlike prostitutes, Zimbabwe's moneychangers do not operate at night. They hang around on the approaches to luxury hotels like the five star Meikles Hotel or the equally prestigious Holiday Inn, occasionally moving up and down the street to avoid detection by the police.

As soon as you park your vehicle, they are all over you, asking what currency you want to buy. They have all sorts of foreign currency in every possible denomination, even though the Reserve Bank of Zimbabwe's coffers are empty. American dollars are the most popular, then the South African rand and the British pound, followed by other currencies.

The traders come in all shapes and sizes, united only by their determination to drive a hard bargain.

At one end of the spectrum is the well-dressed gentleman leaning against his slick Mercedes Benz and tinkering with the latest-model cell phone. At the other is the school-leaver or the woman who looks as though she would be more at home working at a market stall.

Some are there to change money sent home by their relatives in the diaspora. Others are agents working for big businesses, desperate to acquire foreign currency to stay afloat.

Reserve Bank governor Gideon Gono has described the thriving black market trade in foreign currency as Zimbabwe's own "World Bank." Some argue that the parallel currency trade keeps the economy going when it should long since have imploded, and that its existence has therefore averted widespread popular unrest.

The black market took off after the Zimbabwean economy began contracting by an average of four percent annually in 1997, and especially since President Robert Mugabe's land seizures from 2000 onwards precipitated a steep economic decline.

The formal banking system still uses an official exchange rate pegged at 250 Zimbabwe dollars (ZWD) to the US dollar. On the illegal parallel market the American dollar is worth up to 100,000 or 150,000 ZWD, an astonishing difference which makes precise comparisons redundant.

In addition – and of course closely linked to the ZWD's devaluation on the street – the country is suffering alarming inflation rate. In May, prices showed a 4,500 percent increase on the same month in 2006. Economists are even more worried by the rate of increase – prices at the end of May 2007 were 100 percent higher than they had been four weeks earlier.

Wages have been increasing in nominal terms, too, but nowhere near enough to keep pace with inflation. The average monthly wage of a factory worker is 800,000 ZWD – a respectable US$3,200 at the official exchange rate but just eight dollars on the black market.

Rather than try to use the two widely diverging exchange rates as a measure of comparison, it is more useful to set these wages against the minimum cost of living level, which the Consumer Council of Zimbabwe said was 5.5 million ZWD for an average family of six in May. Even though teachers and nurses now earn around four million ZWD a month, their incomes clearly fall well below the minimum they need to get by.

One of the factors driving inflation is that imported goods are bought using foreign currency acquired on the black market, so the retail pric